Document Content

CIRCULAR No.45-TC/TCDN OF JULY 9, 1997 GUIDING THE MECHANISM OF MANAGEMENT AND USE OF THE AID FUND FROM THE FRENCH GOVERNMENT IN 1996

Pursuant to Decree No.58-CP of August 30, 1993 of the Government promulgating the Regulation on the Management of the Loans and Payment of Debts of Foreign Countries;

Pursuant to Decree No.20-CP of March 15,1994 of the Government promulgating the Regulation on the Management and Use of the Official Development Assistance Sources.

Pursuant to Decree No.42-CP of July 16, 1996 of the Government promulgating the Regulation on the Management of Investment and Construction;

Pursuant to Circular No.18-TC/TCDN of March 5, 1994 of the Ministry of Finance guiding the management and use of the Government�s borrowings from foreign countries.

Pursuant to Official Dispatch No.1909/QHQT of April 21, 1997 of the Government on the financial mechanism of the projects using aid sources from the French Government provided for in the Protocol of 1996;

The Ministry of Finance hereby provides the following guidance on the mechanism of management and use of the aid sources provided for in the Financial Protocol of 1996 signed on December 5, 1996 between the Government of the French Republic and the Government of the Socialist Republic of Vietnam:

I. GENERAL PROVISIONS

1. As provided for in the Protocol of 1996, the aid fund from the French Government to the Vietnamese Government (including a non refund grant, a loan from the French Treasury and a mixed credit) is a revenue of the State Budget. It must be reflected in the State Budget and managed according to the current financial regime of financial management of the State. The Ministry of Finance has the responsibility to incorporate it into the State Budget and pay to the French Government when payment of the debts is due (comprising principal and interest).

2. In view of the objective and character of the use of the aid sources as well as the capacity of payment of each project, and on the basis of the binding conditions of the French side and the approval of the Vietnamese government each year, the projects using the aid sources under the Protocol of 1996 are classified as follows:

- The projects to be funded by the State Budget are projects listed in the attached Appendix I.

- Projects funded by re-loans from the French Treasury and the mixed credit under the re-lending conditions provided for by the Vietnamese Government according to the concrete lists in the attached Appendixes II and III.

3. The Ministry of Finance assigns to the General Department for Investment and Development the direct management and allocation of funds and reloans of the projects with corresponding stipulations as above. The Vietnam Investment and Development Bank shall conduct banking transactions in service of the projects using funds from the mixed credit sources.

4. Project owners who are allowed to use the aid sources (including aid and loans) shall have to draw up the plan to draw capital and the plan on their needs of counterpart capital in the country each year for each project and send them to the Ministry of Finance (The External Financial Relations Department and the General Department for Investment and Development) and the Ministry of Planning and Investment for approval, coordination, guidance and monitoring in the implementation.

5. For the projects allowed to use funds from the non refund aid, the project owners shall have to use the funds for the right purpose and according to the commitments made in the Trade Contract.

For the projects which require reloans, the project owners shall have to use the funds and repay the loans according to the commitments in the Credit Contract (Re-lending Contract) signed with the Ministry of Finance and the Government regulations about the management and use of the foreign loans in accordance with the regulatory documents already mentioned above.

II. CONCRETE STIPULATIONS

1. Process and procedure of drawing loans and aid funds

a/ The formulation, evaluation and approval of the feasibility study reports shall have to comply with the provisions of the Regulation on the Management of Investment and Construction issued together with Decree No.42-CP of July 16, 1996 of the Government.

b/ Basing himself on the project already approved by the competent authority, the project owner shall have to carry out the bidding procedures and signing of Trade Contracts with French companies to purchase commodities and supply services. Trade Contracts must be signed before the June 30th, 1998. After that, the project owners shall fill the procedures for approval of Trade Contracts according to Decision No.91-TTg of November 13,1992 of the Prime Minister and the guidance of the Ministry of Trade.

c/ The documents related to the approval of the investment projects and the signed trade contracts together with the bill of approval of the Trade Contracts must be sent to the Ministry of Planning and Investment, the Ministry of Finance (the External Financial Relations Department and the General Department for Investment and Development) Department in order to fill the subsequent procedures with the French side.

d/ On the basis of the official dispatch proposing the draw of aid fund to carry out the Trade Contracts of the project owner together with the notice of approval of the Trade Contract by the Vietnamese Government sent by the Ministry of Planning and Investment to the Commercial Counselor beside the French Ambassador in Hanoi, the Ministry of Finance shall empower the Vietnam Investment and Development Bank to fill the procedures to draw the borrowings from private banks in France with guarantee from the COFACE for the projects in List III using the French mixed aid sources.

e/ On the basis of the Credit Contract signed between the project owner and the General Department for Investment and Development, the Ministry of Finance (the External Financial Relations Departments) shall sign and put its seal on the original document on the trade contract and the related receipts and other vouchers and send them to the French side as certifications of payment to French suppliers or to the Vietnam Investment and Development Bank if it is a loan from the French Bank in order to carry out the external procedures as provided for in the agreement on the opening of the Letter of Credit.

f/ In case the project cannot be carried out or is carried out belatedly because the procedures and dossiers have not been completed or for any other reason, and the project owner wants to withdraw or change his project, he must report in time to the Ministry of Planning and Investment and the Ministry of Finance.

2. Implementation of the allocation of fund and re-loan

a/ For projects requiring re-loan of funds (Appendices II and III)

After the competent agencies have approved the Trade Contract signed between the project owner (or the unit mandated by the parent agency to import the goods) and the French company, the project owner has to sign the Credit Contract with the Ministry of Finance (the General Department for Investment and Development) on the reborrowing of the aid source from the State Budget. The Credit Contract shall be the basis for the project owner to formally contract the debt to the State budget and carry out its obligation in strict conformity with the commitments in this contract.

Conditions for re-lending to the projects using funds of the French Treasury (Appendix II)

- Term of the re-loan: 15 years including 4 grace years

- Interest rate of re-loan: 2.5%/year

- Currency used in the loan: French franc

Conditions for re-loan for projects using mixed credit sources (Appendix III):

+ French treasury sources (accounting for 74.59% of the total loan for the project):

- Term of the re-loan: 15 years including 4 grace years

- Interest rate: 1%/year

- Currency used in the loan: French franc

+ Sources from private credits (accounting for 25.41% of the total loan for the project):

- Term of the re-loan: 10 years without grace term

- Interest rate: as regulated by the French Bank to remain unchanged throughout the loan term

- Currency used in the loan: French franc

Charges: In addition to the above interest rates, the project owner shall have to pay the following charges:

Overseas charge:

For projects using re-loans from mixed credit sources mentioned in Appendix III (comprising partly of the loan from the French Treasury and partly of private credit loans), the project owner shall have to bear the following charges:

+ Commitment charge: 0.5%/year calculated on the capital from which private credit sources are not yet drawn

+ Management charge of the French Bank: 0.8% paid at one time on the total loan from private credit sources

+ Credit insurance charge of COFACE paid in proportion to the charge announced by the French side on the loan from private credit sources.

+ Other charges collected by foreign banks in the course of drawing capital (if any)

Domestic charge:

Service charge on the lending of State credits: 0.5%/year calculated on the loan to be collected by the General Department for Investment and Development and the external transaction charge to be collected by the Vietnam Investment and Development Bank.

Mode of payment of charges

The external transaction charge of the Investment and Development Bank shall be directly collected by the Bank from the project owner during each transaction at the rate defined by the Bank.

The General Department for Investment and Development directly collects:

+ Domestic charge at the rate of 0.5%/year from the project owner together with the timetable of collection of principal and interest.

+ Overseas charge composed of commitment and management and other charges (if any) mentioned above from the project owner on receipt of the notice of the Investment and Development Bank so that the State Bank may have funds to pay to the French side when the term is due. For the credit insurance charge in particular, it shall be supplemened by France and shall be added to the total loan which the project owner is funded to acknowledge debts to the General Department for Investment and Development.

The General Department for Investment and Development shall announce the timetable for debt payment to the State Budget by the project owner. The project owner has the responsibility to repay the principal, interest and the charge when the term is due as indicated in the notice. The project owner may pay the debt before term to the State Budget.

In case he cannot pay the debts on schedule to the Ministry of Finance for whatever reason, the project owner shall have to pay the penalty overdue interest as prescribed by the French penalty rate for overdue debts as indicated in the Agreement of Application (the penalty on overdue payment is 2.5%/year for loans of the French Treasury and PIBOR +2.5%/year for private credit loans)

b/ With regard to the projects funded by the State budget (Appendix I)

The Ministry of Finance (The General Department for Investment and Development) shall allocate funds to the projects listed in Appendix I attached to the current regime on the allocation and management of capital construction fund from the State Budget.

With regard to the projects funded by the State budget, the overseas and external transaction charges shall be paid for by the State Budget. The Investment and Development Bank shall have to inform in time the Ministry of Finance (the External Financial Relations Department and the General Department for Investment and Development) of the abovesaid payable charges.

With regard to the projects funded by non-refund aid sources from the French Treasury, this loan must be recorded in an aid acknowledgement paper. When he receives the notice to receive the aid goods, the project owner shall go to the Ministry of Finance to fill the procedures of aknowledging this reception. In case the foreign party has ordered the goods inside Vietnam, the project owner shall fill the procedure to certify the reception of the aid within 30 days after receiving the goods. The necessary dossiers to certify the reception of the aid shall include:

+ The document approving the program or project by the competent agency

+ The agreement or other documents of agreement signed officially with the foreign partner in which the project being implemented is clearly recorded.

+ The document approving the Trade Contract

+ The Bill of Lading or Airway Bill.

+ The Packing List

+ The Invoice

+ The Insurance Certificate.

The vouchers recording expenses and revenues through the State budget comprise:

+ The bill of the Ministry of Finance certifying the reception of the aid goods; or

+ The debt notice of the French Development Fund on behalf of the French Treasury and the payment bills to the French suppliers (including the vouchers for the technical services) issued by the French commercial agency; or

+ The debt notice of the French Bank.

3. Other provisions

a/ The Ministry of Finance empowers the Vietnam Investment and Development Bank to conduct external payment services with France for the credit loans from the French Banks with guarantee of COFACE. Immediately after drawing its fund, the Vietnam Investment and Development Bank has the responsibility to send to the Ministry of Finance the listing for capital drawing in order to conduct the procedure of budget accounting. At the end of each term, the Vietnam Investment and Development Bank shall send to the Ministry of Finance a copy of the timetable of debt payment of the loans so that the Ministry of Finance timely may send money and a copy of the spending order to the Vietnam Investment and Development Bank (5 days before the term of debt payment to the foreign party is due).

b/ All the goods, equipment and services of the projects for importation of ODA projects of France under the 1995 Protocol in service of the project shall be exempted from import tax as provided for in the Guiding Document No.1269-TC/TCT of April 22,1997 of the Ministry of Finance.

c/ When the project is completed, the project owner shall have to draw up the statement of reception and utilization, assess the efficacity of the project and send them to the parent agency and the Ministry of Finance. The process and requirements of the drawing of the final statement of accounts, the contents of the report in the final statement of accounts and the approval of the statement shall have to comply with the guidance in Circular No.66-TC/DTPT of November 2,1996 of the Ministry of Finance.

III. ORGANIZATION OF IMPLEMENTATION:

This Circular takes effect 15 days after its signing. The parent agencies of the projects shall guide the project owners to implement scrupulously the provisions in this Circular. In the process of implementation if any problem arises, the project owners and the parent agencies should report it in time so that the Ministry of Finance may examine and settle it.

For the Minister of Finance

Vice Minister
LE THI BANG TAM

Appendix I

LIST OF PROJECTS ALLOWED TO USE FRENCH AID SOURCES IN FISCAL 1996 ACCORDING TO THE REGIME OF STATE ALLOCATION OF CAPITAL

(Attached to Circular No.45-TC/TCDN of July 9, 1997 of the Ministry of Finance)

No. Name of project Parent agency Aid funds Funding source

(million FF)

1 Equipment for Nghe An hospital Nghe An People�s Committee 4 Non-refund aid

2 Equipment for Yen Bai hospital Yen Bai People�s Committee 4 Non-refund aid

3 Informatization of Notarization

(2nd stage) Ministry of Justice 7 Non-refund aid

4 Technical assistance to

the General Statistics Department General Statistics

Department 0.4 Non-refund aid

5 Hydrometeorology (3rd stage) General Hydrometeorology

Department 18 Treasury loan

6 Assembly of trucks

and generators Ministry of Defense 35 Mixed credit

7 Fire fighting ships Ministry of the Interior 5 Mixed credit

Appendix II

LIST OF PROJECTS ALLOWED TO USE LOANS FROM THE FRENCH TREASURY, FISCAL 1996, ACCORDING TO THE STATE REGIME OF FUND RELENDING
(Attached to Circular No.45 TC/TCDN of July 9, 1997 of the Ministry of Finance)

No. Name of project Parent agency Funding source

(million FF)

1 Restoration of Yen Bai water supply system Yen Bai People�s Committee 25

2 Restoration of Lao Cai water supply system Lao Cai People�s Committee 13.4

3 Restoration of Hoa Binh water supply system Hoa Binh People�s Committee 15

APPENDIX III

LIST OF PROJECTS ALLOWED TO USE FRENCH MIXED CREDITS, FISCAL 1996, ACCORDING TO THE STATE REGIME OF FUND RELENDING
(Attached to Circular No.45-TC/TCDN of July 9,1997 of the Ministry of Finance)

No. Name of project Parent agency Funding source

(million FF)

1 Restoration of Nam Dinh

water supply system Nam Dinh People�s Committee 30

2 Traffic lights in Ho Chi

Minh City HCMC People�s Committee 15

3 Railway cranes Ministry of Communications and Transport 14

4 Manufacture of sparking-plugs Ministry of Communications and Transport 40

5 Training of air pilots VN Civil Aviation 12

6 Training of air controllers VN Civil Aviation 5

7 Restoration of Thanh Hoa

electric grid Ministry of Industry 43

8 Modernization of Postal

and Telegraph General Department of Post and

Centre Telecommucations 50

9 Reserve 15